In recent years, there has been a veritable craze surrounding the idea that German corporations want to learn from the creativity of young companies. To this end, large corporations such as Daimler and BMW have established venture capital funds, launched incubators, or simply forged partnerships. However, local corporations and medium-sized companies are very cautious when it comes to acquiring startups, as a new study by the Berlin-based company builder Germantech Digital now shows.
The authors of the study analyzed changes in startup ownership worldwide from 2012 to 2016. During this period, a total of 287 German startups were acquired. With 93 companies, about one-third came under the ownership of foreign buyers. Although two-thirds (exactly 194) remained in German hands, not even half (90) were purchased by German companies.
A comparison with the United Kingdom is also revealing in this context: German companies acquire three times fewer startups than firms from the United Kingdom, even though Germany’s gross domestic product is 42 percent larger.
At least one German company, SAP, ranks at the top in Europe. Among startup acquirers within the European Union, the Walldorf-based software group is number one. With the online retailer Zalando, another German company made it onto the list of the top 15. The Berlin-based company, however, ranks last in the analysis. Following SAP in the rankings are Nokia, the medical technology company Covidien, the music streaming service Spotify, and the publishing house Wolters Kluwer.
Comparisons with the U.S. are almost out of the question. When it comes to exits, Germany is a developing country compared to the U.S.—both in terms of acquirers and the origin of the startups. While 4,654 startups changed hands in the U.S. between 2012 and 2016, the figure in Germany was just 166.
Germantech Digital has also examined the reasons for this reluctance in Germany. The most important reason is the difference in working styles between companies and startups. In addition, conflicts between founders and corporate management—and the resulting loss of decision-making autonomy—are a major hurdle. Compounding this are technical issues related to IT and data protection, which is a very significant concern in Germany. Potential corporate buyers also fear that the startup’s founding team will leave after the acquisition.
However, some domestic companies are bucking the trend and bringing in drivers of innovation through acquisitions. The sums involved can be quite substantial. For example, the DAX-listed company Adidas acquired the fitness startup Runtastic in 2015 for 220 million euros. That same year, the media group ProSiebenSat.1 purchased the comparison portal Verivox for 210 million euros. These are exceptions, however, as only 43 large German companies with more than 1,000 employees made acquisitions on a significant scale during the same period.
A study conducted last year by the specialty chemicals group Altana already showed that German companies are hesitant when it comes to startups. According to the study, 11 percent of industrial companies have investments in young companies. However, the study did not address acquisitions. Beyond financial investments, German industrial companies also use other forms of networking to promote innovation. Ninety-two percent rely on cooperation with customers, for example in joint product development. Eighty-seven percent collaborate with service providers, and 86 percent engage in knowledge exchange through industry associations.
